In the current economic climate, putting your money in a certificate of deposit account can provide some stability. If you can afford to lock up some of your funds for a set term, fixed-rate CDs can help your money grow in a predictable way. Given the market volatility and recession fears, is now a good time to lock in certificates of deposit rates? Here’s what to consider and the differences between short-term and long-term CDs.
[Read: Best CD Rates.]
Why It Makes Sense to Lock in CD Rates Now
The Federal Reserve cut its benchmark interest rate by a quarter percentage point in October, trimming the rate for a second consecutive month after previously holding it steady throughout 2025. Still, the federal funds rate remains in the 3.75 to 4% target range, which is relatively high. Fed officials remain undecided as to whether they’ll drop the rate again in December, saying it will depend on incoming jobs and inflation data. Forecasters still generally anticipate another rate cut in December.
You can use this to your advantage and grow your money. Locking in CD rates now can help you secure a higher rate before future potential rate changes take place.
CD rates have held relatively steady through much of 2025. The average six-month CD paid 1.49% in November, while the one-year rate stood at 1.64% and the five-year rate was 1.34%, according to the FDIC. Those figures get dragged down by CD rates at major banks that typically pay close to zero interest, so you should shop around for a much higher rate than the national average.
Rates on high-yield CDs dipped in the weeks surrounding the Fed’s September rate cut, according to a U.S. News analysis. They dropped again slightly following the October cut, although short-term rates have ticked back up in November. You can still find both short-term and long-term CDs that pay 4% APY or higher, although that may not be the case much longer.
“Take advantage of what’s out there because it’s more than likely going away in the very close future and we’re going to probably see a more lending environment than deposit environment,” says Lori Gravitt, assistant vice president and branch manager at Addition Financial.
Lower rates make borrowing easier and more affordable but tend to bring lower yields for savings products.
Short-Term vs. Long-Term CD Rates
Certificates of deposit may offer you higher rates than a savings account. The tradeoff is that you must not touch the money you put into a CD for the set term. Doing so would trigger an early withdrawal penalty, which varies by financial institution. But is it better to choose a short-term or a long-term CD right now?
You have the flexibility to choose a CD term that works with your timeline and goals, whether that’s three months, six months, one year or five years. Generally, banks reward you with a higher annual percentage yield if you opt for a longer term. That gives banks a longer runway to use your funds. However, that’s not the case right now.
For the last several years, short-term CDs have been offering higher APYs than what you might find with long-term CDs. For example, Ally currently has a six-month CD offering 3.90% APY. The five-year CD has an APY of 3.50%.
But why are CD rates lower for longer terms right now? In technical terms, we have an inverted yield curve. With a normal yield curve, investors get rewarded with higher rates for tying up their money longer and taking on extra risk. After all, many variables affect interest rates, and the economy can change a lot over time. But when the yield curve inverts, investors believe that the economy may be weakening and that the Fed will be cutting rates. And according to the Fed, an inverted yield curve is a “powerful predictor of future recessions.”
The gap between short-term and long-term CD rates is tightening, though. U.S. News found that among high-yield CDs, rates on six-month terms are averaging 3.85% APY, while three-year CDs are paying 3.51% APY and five-year CDs offer 3.50% APY.
Given the current economic climate, the federal funds rate is currently high in an attempt to combat persistent inflation. Banks feel comfortable offering higher rates now to track today’s higher federal funds rate. But given the anticipated rate cuts and uncertain economic future, you’ll see lower CD rates for longer terms right now.
[Read: How to Build a CD Ladder for Retirement]
CD Laddering Can Help You Diversify
If you want to diversify your savings strategy, consider a CD ladder. Through a CD ladder, you invest your funds in CDs with different term lengths. Normally, you’d divide the amount equally over the various CD terms, but you don’t have to do it that way.
A CD ladder ensures you’re maximizing rates and access to funds. Typically, this helps you get your money faster if you need it while securing higher rates in the longer term.
“The ladder’s interesting because typically the premise of the ladder is that you would have two or three different CDs and step one is the lowest rate, step two is the middle rate, step three is the highest rate,” says Derik Farrar, head of personal deposits at U.S. Bank. “Now, you could find a high six-month rate and an acceptable 12-month rate, and maybe there’s a nine-month or an 18-month in between. But most of the market is concentrated where the attractive rates are under 12 months in duration.”
Once your CD term reaches maturity, you can reinvest those funds in a new CD to maintain your ladder. Of course, you don’t have to use this strategy and can cash out when the CD matures or choose different terms. Make sure you plan for that, as some CDs have automatic renewal at maturity.
What to Consider Before Opening a CD
Now is a good time to lock in a high APY with a certificate of deposit. You can use a CD ladder to secure the best short-term CD rates and long-term CD rates. But before locking rates, understand you’re tying up your money.
“I always ask, ‘Do you need this money?’ I even ask members, ‘When’s the last time those little emergency things have happened in your life? When did the water heater go out? Are these the funds that you would use for that particular purpose?'” Gravitt says.
While CD accounts can be a safe way to earn a solid return, you also want to make sure you have accessible cash in an emergency savings fund. Typically, a high-yield savings account is a good option for that. You can use both of these accounts for different purposes.
Farrar suggests consumers “need to know what they’re saving for and if they’re just maximizing for yield or if there is a particular life event that they’re saving for.”
For example, there’s a difference between wanting the best possible rate for its own sake compared to locking away funds for two years that are intended as a down payment on a home. If you do have a goal in mind, choose a CD term that aligns with that goal and keep your money growing.
The Bottom Line
Certificates of deposit can be a great addition to have on top of a high-yield savings account. CDs typically give you a fixed rate, while savings accounts have a variable rate. When shopping around for CDs, compare APYs and CD terms lengths.
Look at minimum deposit requirements as well. For example, Ally Bank offers no minimum deposit, while Wells Fargo requires a $2,500 minimum opening deposit for CDs. Read the fine print and understand CD early withdrawal penalties. Once you decide where to park your cash, you can open a CD and reap the rewards.
“If you’re investing in CDs for the first time, like any investment, don’t put your eggs in one basket,” Petersmarck says. “Make sure that you’re diversifying your portfolio. And then also with CDs, my recommendation is again, invest in them now versus waiting until the end of the year. I would certainly take advantage of what rates are being offered right now.”
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Is Now a Good Time to Lock In Certificate of Deposit Rates? originally appeared on usnews.com
Update 12/03/25: This story was previously published at an earlier date and has been updated with new information.
